Question

In: Finance

Fixed costs                                        &nbs

Fixed costs                                          $190,000

Variable cost per procedure                $50

Volume                                               10,000 visits                                        

                                                

Given the information above:

  1. What revenue per visit is required to break even?
  2. What revenue per visit is required to provide a profit of $100,000?
  3. Using the answer to question 2 above, find the contribution margin required to provide a profit of $100,000

Solutions

Expert Solution

1)

At break-even point, profit is zero.

Profit = Sales revenue – Variable cost - Fixed cost

Fixed cost = Sales revenue – Variable cost

$ 190,000 = Sales revenue – $ 50 x 10,000

$ 190,000 = Sales revenue – $ 500,000

Sales revenue = $ 190,000 + $ 500,000

                          = $ 690,000

Sales per unit = Total sales revenue/Sales volume

                        = $ 690,000/ 10,000 = $ 69

Revenue of $ 69 per visit is required to break-even

2)

Profit = Sales revenue – Variable cost - Fixed cost

$ 100,000 = Sales revenue – $ 50 x 10,000 - $ 190,000

$ 100,000 = Sales revenue – $ 500,000 - $ 190,000

Sales revenue = $ 100,000 + $ 500,000 + $ 190,000

Sales revenue = $ 790,000

Sales per unit = Total sales revenue/Sales volume

                        = $ 790,000/ 10,000 = $ 79

Revenue of $ 79 per visit is required to provide a profit of $ 100,000.

3)

Contribution margin = Sales – Variable cost

                                 = $ 790,000 - $ 500,000 = $ 290,000

Contribution margin of $ 290,000 required to provide a profit of $ 100,000

jeff jeffy answered 1 year ago
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